1030HARP DU REFI PLUS (6/8/12) DESCRIPTION REQUIRED BORROWER BENEFIT DU Refi Plus is a limited cash-out refinance program that allows for expanded eligibility criteria, as well as reduced documentation requirements. Loans must be underwritten through DU and receive an acceptable finding. Fannie Mae must currently own all loans. Eligibility for DU Refi Plus is determined and identified in the DU Underwriting Findings Report. Standard Limited Cash-out refinances must not be coded as DU Refi Plus loans. Available ONLY for loans with no Mortgage Insurance on the existing loan. Note: DU cannot determine if the following requirement is met, so Lender must represent and warrant that the borrower is receiving a benefit from refinancing in the form of either: A reduced monthly mortgage principal and interest payment; or interest rate A more stable mortgage product, such as: Refinancing an ARM product to a Fixed Rate Refinancing an Interest only product to a fully amortizing product Refinancing a 30-year term to a 15-year term, whereby amortization is accelerated and equity is built up faster The required borrower benefit must be noted in the Underwriter approval rationale on the 1008. MONTHLY PAYMENT INCREASE LIMITATION BORROWER ELIGIBILITY Principal and interest payment for the new loan must be lower than the existing loan, unless the loan is being refinanced into a more stable product. Reduction In interest rate or a reduction in loan amortization term are eligible benefits. Borrowers on the existing mortgage must match the borrowers on the new mortgage, except as indicated below. A new borrower may be added to the new loan, provided the existing borrower(s) is/are retained. An existing borrower may be removed provided: The remaining borrower(s) provide evidence that they have been making the payments on the existing mortgage from their own funds for the most recent 12 months prior to the origination of the new mortgage. This 12-month payment history must be for the existing mortgage only it may not be satisfied using multiple consecutive mortgages. No Exceptions. If the borrower is being removed due to death, the 12 month payment history is not required; however, the remaining borrower must provide evidence of the deceased borrower's death. In lieu of a death certificate, borrower may provide a written statement confirming the deceased borrower s death and the date of the death. The borrower being removed must also be removed from the deed (or provide evidence of death, as applicable. Note: Removal of borrowers can be for any reason, not solely due to death or divorce.
Social Security Number Messaging: Refer to the Borrower Eligibility section of the Desktop Underwriting for additional requirements. Note: ITIN numbers are not permitted. SSN Correction: If an inaccurate SSN is preventing DU from underwriting a casefile as a DU Refi Plus loan, the new lender no longer has to have the borrower work with their servicer to get the number corrected; they can contact Fannie Mae s Customer Contact Center at 1-877-722-6757. The lender must provide the new DU Casefile ID to Fannie Mae. Eligible Existing Loans: DU will determine if the existing loan is eligible for this program. EXISTING MORTGAGE LOAN For loans submitted to DU prior to April 11, 2011, the existing loan must have been delivered to Fannie Mae prior to March 1, 2009 for loans submitted to DU on or after April 11, 2011, the existing loan must have been delivered to Fannie Mae prior to June 1, 2009. Ineligible Existing Loans: Existing loan has mortgage insurance in place. Any loan not currently owned by Fannie Mae Borrowers may not be sourced via marketing campaigns that expressly single out Fannie Mae loans for the purpose of refinancing existing loans. Loan has Lender-Purchased MI. NEW MORTGAGE LOAN Eligible New Loans: Agency Conforming Loans Fully Amortizing Fixed Rate Agency Jumbo Loans - Fully Amortizing Fixed Rate DU findings must indicate the loan is eligible as a DU Refi Plus loan, or, for loan sizes above the standard conforming limit, if it is eligible as an Agency Jumbo loan. (Refer to Maximum Loan Amount section below.) Ineligible New Loans: Mortgage insurance is required on the new loan DU Expanded Approval Flexible Mortgage Loans MyCommunityMortgage Loans Bond Programs Construction to Permanent Cash-Out Refinance LOAN PURPOSE Limited Cash-Out Refinance (a.k.a. rate/term refinance), which includes: The payoff of the unpaid principal balance on the existing first mortgage (no subordinate financing); The financing of the payment of closing costs, prepaid items, and points, Cash back to the borrower is permitted up to a maximum of $250 to allow for changes in closing costs. Cash back on the final HUD-1 may only exceed $250 by the amount that was paid outside of closing by the borrower, as documented in the loan file. Note: Refunding an existing escrow account at closing does not have to be included in the $250 restriction since these funds are paid by the borrower. If changes exceed $250, the loan amount must be adjusted. Principal curtailments are only allowed as a result of at closing excess premium rate credits. The amount must be identified on the HUD-1 Settlement Statement and is limited to the amount of the excess premium rate credit.
OCCUPANCY Primary Residence Second Home (1 unit only) Investment Property (excludes co-ops) Note: Although Fannie Mae permits multi-unit second homes, if borrower currently receives rental income or has ever received rental income from the property, the subject property must be treated as an investment property. PROPERTY TYPE Eligible: 1-4 Unit, including condominiums, PUDs (Type E only) Ineligible: Manufactured homes MULTIPLE MORTGAGES PRODUCTS Non-warrantable Condos There is no limit on number of financed properties held by the same borrower for Primary, Second Homes and Investment properties Eligible - Fully Amortizing: Fixed Rate (15 & 30 year terms) Agency Conforming: 1030RPMAE, 1015RPMAE Agency Jumbo: 1030RPMAE, 1015RPMAEH Ineligible: All other products not listed above as eligible MAXIMUM LOAN Agency Conforming or Agency Jumbo loan size, depending upon eligibility. AMOUNT LTV/ CLTV/ HCLTV OCCUPANCY UNITS ** LTV* CLTV FICO Primary 1-4 UNITS 125% Unlimited 620 Second 1 UNIT 125% Unlimited 620 Investment** 1-4 UNITS 125% Unlimited 620 *Over 80% LTV is only permitted if MI is not required ** Full Interior/Exterior Appraisal required on all investment properties & all 1-4 Unit properties SUBORDINATE FINANCING HIGHER PRICED MORTGAGE LOANS (HPML) New subordinate financing is not permitted. Existing subordinate liens must be re-subordinated; they may not be paid off or paid down with the proceeds of the new mortgage. Lenders must represent and warrant that Community Seconds meet Fannie Mae requirements and approval guidelines. HPML loans are not permitted. DOCUMENTATION PROCESS Desktop Underwriter (DU) Approve/Eligible Ineligible: All other documentation processes
BUY DOWNS ESCROW WAIVERS Not permitted. Generally, the LTV must be 80% or less (unless state law dictates escrows are not required for mortgage loans with an LTV > 80%), however, escrows on the new loan may be waived if the existing loan has escrows waived. QUALIFYING RATE Determined by DU MORTGAGE INSURANCE - If MI is required per DU findings, the loan is NOT eligible for purchase by Essex Mortgage. Existing loans with MI in force are not eligible ORIGINAL LTV of existing loan Existing loan has MI in force? MI required for new refinance loan? ELIGIBLE < 80% No No 1 YES > 80% No MI previously canceled or terminated per No 1 YES Selling and Servicing Guide requirements > 80% Yes Yes NO DU DECISIONS Submission to DU: An accurate address is critical to determining if the subject property address on the loan casefile matches a subject property address for an existing Fannie Mae loan. Incomplete and/or inaccurate property address data may prevent a loan casefile from being underwritten according to DU Refi Plus underwriting guidelines. If DU is unable to match the borrowers and subject property address on the loan casefile with an existing eligible Fannie Mae loan, the loan casefile will be underwritten according to the standard DU eligibility and documentation requirements. Underwriting Findings Report: DU will issue the following message when the loan is identified as being eligible for DU Refi Plus. Loans must receive this message to be eligible for this process type: "This loan casefile was underwritten according to the DU Refi Plus expanded eligibility guidelines offered on certain limited cash-out refinance loan casefiles where the borrower's existing loan is identified by DU as a Fannie Mae loan. This loan casefile must be delivered with Special Feature Code 147." DU Recommendations: Loans must receive one of the following recommendations: Approve / Eligible Loans that receive any recommendation from DU other than those listed above are not eligible for this program, and are not eligible for manual underwriting under a different process type. Validation Requirements: All requirements in the final DU underwriting findings report must be met. U/W REQUIREMENTS There are no exceptions to the requirements in this program. In addition to the requirements in the DU findings, the underwriter must confirm
that all requirements in this fact sheet are met. DU is not able to identify or message the following items, therefore special attention must be paid if any of the following are present on the loan: Non-taxable income Trailing secondary wage earner income (Not an eligible income type ) Deed Restrictions not allowed Up-front fees financed with a credit card Individual Development Accounts Bankruptcy & Foreclosures: 48 months must have elapsed from the date of bankruptcy was discharged or dismissed (84 months for a foreclosure) or per DU output whichever is more restrictive. Note: DU identifies prior foreclosures as follows: Mortgage accounts, including first and second liens, home improvement loans, HELOCs and mobile home loans are identified as a foreclosure if there is a current status or manner or payment/mop code of "8" (foreclosure) or "9" (collection or charge-off), or if there is a foreclosure-related Remarks Code in the credit report data that is associated with the tradeline. Unpaid Charge-offs & Collections: Only accounts that impact the first lien position must be paid or as determined by DU. Lawsuits: The underwriter should consider whether a lawsuit the borrower is involved in impacts the first lien position. Borrower Identity Verification, Social Security Numbers, Validation of Qualified Parties to Transaction and Unit Numbers - refer to the Borrower Eligibility section of this Manual for requirements. CREDIT REPORT A new merged credit report with the borrower(s) representative credit score is required. DU will determine if the Borrower meets mortgage payment delinquency, bankruptcy and foreclosure policies applicable for DU underwritten loans, based on information contained in the credit report. See Mortgage History section of this fact sheet for additional requirements. Credit Inquiries: The borrower must address all inquiries CREDIT SCORE Minimum credit score is 620 (regardless of DU) All borrowers must have at least 1 credit score DEBT RATIO Qualifying rate and debt ratios are as determined by DU. DU Refi Plus loans will continue to be subject to the maximum allowable total expense ratios currently applied to all DU loan case files. Loans that exceed the maximum will receive an Ineligible recommendation, which is not an acceptable recommendation. MORTGAGE Determined by DU. HISTORY RESERVES Determined by DU. SEASONING There is no minimum seasoning requirement for the existing mortgage. REQUIREMENT FIRS FORM 4506-T A signed IRS Form 4506-T is required on all loans, regardless of income type (salary, self-employed, social security, etc.). All borrowers must sign the IRS Form 4506-T at application and closing. If tax returns are used to calculate borrower income, the Form 4506T must be processed prior to loan approval. All forms and transcripts must be included in the closed loan package. PROPERTY MARKET RENTS The gross monthly rent for each unit in the subject property must be documented in each loan, even when the borrower is not utilizing rental income to qualify. For all investment properties AND all 2-4 unit primary residences, when rental
income is not used to qualify, the gross monthly rental income for each unit must be documented with one of the following: Form 216: Operating Income Statement for investment and 2-4 unit owner occupied properties (including those in which the borrower occupies one of the units as a principal residence), or Form 1007: A Single Family Comparable Rent Schedule for one-unit investment properties, or Small Residential Income Property Appraisal Report (Form 1025) Current Lease Agreement(s), or If the property is not currently rented, an opinion of market rents provided by the appraiser, or Borrower to provide the gross monthly rent being charged or to be charged for the property. Monthly rental amounts must be stated separately for each unit. The disclosure from the borrower must be in the form of: A written statement from the borrower; or An addition to the loan application APPRAISAL Lender must comply with the property fieldwork recommendation issued by DU except as indicated below*, or a different appraisal format is required to meet standard project approval requirements * Note: DU will indicate the type of fieldwork recommendation that is required, and if applicable, that a fieldwork waiver is permitted. If the property is located within an area subject to a natural disaster, or if the DU findings reflect red flags in connection with the value submitted, the minimum fieldwork recommendation should be followed; a PIW would not be permitted. Estimated Value Message: The following message will be issued on DU Refi Plu casefiles where the subject property address can be standardized and FNMA s datebases have sufficient information about the property to estimate a value: Based on the standardized address, Desktop Underwriter estimates the value of the property at $<estimated value>. This estimated value was developed by internal proprietary models to help determine eligibility for a DU Refi Plus Property fieldwork waiver. It is not the result of an appraisal, nor was it developed by a state licensed or certified appraiser. This estimate is intended to be used solely by the lender to underwrite the refinance of the borrowers mortgage loan. If the DU Refi Plus property fieldwork waiver is offered, the lender has the option to: 1. Resubmit the loan casefile using the estimated property value provided by DU; OR 2. Exercise the waiver using the value entered by the lender (whether based on the lender s estimate or the borrowers estimate, or another value obtained for the property). If a waiver is not offered, the lender has the option to: 1. Resubmit the loan casefile using the estimated value provided by DU; OR 2. Obtain an appraisal (as indicated in the DU underwriting findings) Fannie Mae Index Property Valuation Options - Not permitted.
Property Fieldwork Waivers For certain eligible loan casefiles, DU will waive the requirements of an appraisal or exterior-only property inspection for a fee of $75 at delivery. (Fees for PIWs (property inspection waivers) are net funded at the time of loan purchase.) Listed for Sale: Essex policy related to properties listed for sale applies. A DU Refi Plus Property Inspection Waiver (PIW) may only be exercised if: The final submission of the loan casefile to DU resulted in a property fieldwork waiver offer; and The property fieldwork waiver offer is not more than four months old on the date of the note and the mortgage. When a DU Refi Plus DU Refi Plus PIW is exercised, Fannie Mae accepts the property value estimate submitted to DU as the market value for the subject property, and the lender is not required to make any representation or warranty as to value, marketability, or condition of the subject property. However, the lender continues to be required to represent and warrant that all of the information and data submitted to DU is complete and accurate. A DU Refi Plus property fieldwork waiver may not be exercised if there is reason to believe that fieldwork is warranted based on additional information obtained about the property or subsequent events such as a hurricane or other natural disaster, or based on additional information provided by DU regarding the subject property for these loans. In these situations the minimum level of property fieldwork as specified by DU must be ordered. Appraisal update and aging requirements apply to these loans.